UAE could invest billions of dollars in overseas data centres
UAE could invest billions of dollars in overseas data centres
InvestUAE has signed 10 bilateral digital infrastructure deals over past six months
The UAE Ministry of Investment (Invest UAE) and Uzbekistan's Ministry of Digital Technologies this week signed an investment memorandum to establish a framework for investment in digital infrastructure with a focus on data centre and artificial intelligence projects in Uzbekistan. It is the 10th such memorandum signed by the UAE during the past six months and part of an ambitious initiative to build billions of dollars worth of data centres with partner nations.
InvestUAE has so far signed bilateral digital infrastructure memorandums with 10 foreign governments, which could see the UAE build out up to 8 Gigawatts (GW)* of data centre capacity purely on the basis of MoUs signed to-date. In addition to Uzbekistan, the UAE has so far signed digital infrastructure agreements with Azerbaijan, Egypt, Greece, India, Indonesia, Kazakhstan, Kenya, Malaysia and the Philippines. All include plans to build new data centres.
The UAE is moving into a new phase in its artificial intelligence journey, in which it aspires to both influence global AI policy and increase the economic contribution of AI and its related technology sectors, such as cloud infrastructure and services. In support of this effort, the country plans to invest in overseas data centres potentially worth tens of billions of dollars, via bilateral agreements with partner nations.
Data centres have now become essential infrastructure for economic competitiveness and many countries are unable to build enough data centres to keep pace with demand. However, data centres can be costly to build and operate, with the high capital costs associated with setting them up, and the high energy consumption associated with running them. Hence, many data centre projects include multiple public and private sector investment partners.
The cost of building data centres varies from location-to-location. The watt is the unit used to measure data centre capacity, and today US$ per watt is used as the method of estimating the cost of data centre builds. According to UK-based professional services firm Turner and Townsend, 2023 data centre costs per watt, vary from $6.40 per watt in Mumbai, India, through to $13.70 per watt in Tokyo, Japan. Saudi Arabia is estimated at $10 per watt, and the UAE at $8.35 per watt.
Costs go up and down, but normally increase due to inflation. So, according to Turner and Townsend's estimate, the cost of building a 25 megawatt data centre in the UAE could be estimated as $8.35 X 25,000,000 watts = $208,750,000.
A real life example is the 25 megawatts capacity data centre being built in Maadi Technology Park in Cairo, Egypt, by UAE-based Khazna Data Centres in partnership with local IT firm Benya Group, at a cost of $250 million. So, the cost per watt calculation would be $10.
Most of the new UAE bilateral digital infrastructure agreements specify a figure in watts for the total target capacity, to be built out over time in the country concerned. For Egypt this was 1,000 MW (or 1 GW), Greece was 500 MW, India was 2 GW, Indonesia was 1 GW, Kenya was 1 GW and The Philippines was 500 MW. These capacity goals alone total 6 Gigawatts and, if calculated at an average rate of $8.5 per watt, might cost $51 billion to build based on 2023 levels.
Data centre capacity figures were not announced for the digital infrastructure agreements with Azerbaijan, Kazakhstan, Malaysia, or Uzbekistan. Taking into account the capacity as quoted in the other deals, the potential capacity plans for the four countries could be estimated to total between 1 to 2 Gigawatts. So, the total planned data centre capacity across all 10 bilateral agreements could total as much as 7 or 8 GW, which could total $59.5 billion to $68 billion, calculating the cost at an average rage of $8.5 per watt.
Due to the nature of both data centre builds and bilateral agreements, the planned deployment of data centres in these 10 countries will likely take place over a number of years, the capacity may be subject to change and could involve multiple local or international investors in each project. It is also likely that more bilateral digital infrastructure agreements will be signed with other nations in the future.
This week's UAE Invest deal with Uzbekistan aims to explore joint investment opportunities for new data centres and attract major cloud service providers to the country. Also under the bilateral agreement, the two countries will consider super-computer projects, the development of language models specific to Uzbekistan, and establish a local talent ecosystem for AI and computing.
So, how might the UAE benefit from these investment deals, over and above influencing cloud and AI adoption in partner nations? Well, Khazna Data Centres has already made Indonesia and the Philippines top priorities for its international expansion, both of which now have digital infrastructure deals with the UAE. As mentioned, it is already building a 25 megawatt data centre in Egypt.
The current Khazna Data Centres company was formed via the merger of the data centre business of UAE telecom group e& (Etisalat) and that of Abu Dhabi artificial intelligence group G42, following a deal signed in 2021.
The company now operates 12 data centres across the UAE, with a total forecast capacity of 300 MW. Khazna aims to add another 12 centres over the next two years. Already the Middle East’s largest regional data centre provider, the company has ambitious international expansion plans, both within the Gulf region (e.g. Kuwait and Saudi Arabia), and for data centres in Asia and Africa.
Meanwhile, Khazna Data Centres parent group G42 recently signed an agreement in March with EcoCloud to develop a geothermal-powered data centre in Kenya. The data centre will have an initial capacity of 100MW and the capacity for expansion up to 1 GW. Later that month, Invest UAE signed its digital infrastructure agreement with the Kenyan Ministry of Information, Communications and the Digital Economy, specifying data centre projects up to a total capacity of 1 GW.
G42, of course, provides more than data centre infrastructure and, with its new shareholder Microsoft as a strategic partner, is well positioned to provide government and public cloud platforms, AI solutions and digital services.
The new series of bilateral digital infrastructure memorandums signed by the UAE represent both an unprecedented commercial opportunity for the country and the opportunity to build international support for UAE’s vision for AI, However, these bilateral deals will not only require the physical data centre infrastructure, but also the AI and cloud platforms to ensure they deliver value to partner nations. The UAE now has the ability to deliver both global technology and new artificial intelligence technology developed at home, to help its partners fast-track their own AI and data plans.
*an estimate based on calculation, not an official estimate
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